Cointegration analysis of German and British tourism demand for Greece

Germany and Great Britain are traditionally two of the most important sources of tourism for Greece. The purpose of this paper is to investigate changes in the long-run demand for tourism to Greece by these two countries. In order to explain the demand for tourism, we are using a number of leading macroeconomic variables, including income in origin countries (Germany and Great Britain), tourism prices in Greece, and transportation cost and exchanges rates between the three countries. Annual data from the three countries, covering the period from 1960 to 2000, are employed. Augmented Dickey-Fuller test for unit root is examined in the univariate framework and Johansen's maximum likelihood procedure is used to test the cointegration method and to estimate the number of cointegrating vectors of VAR model. Error correction models are estimated to explain German and British demand for tourism to Greece. (C) 2003 Elsevier Science Ltd. All rights reserved.